Chocolate lovers, beware: prices could go up this summer just like last year.
There’s an unsavory forecast for one of chocolate’s key ingredients: cocoa. Bad, dry weather conditions are shrinking the cocoa supply, which eventually affects American consumers.
The price of cocoa is up 12% so far this year. That eats into the profits of chocolate makers and forces them to consider hiking prices on chocolate bars, balls, sauce and everything else.
It’s deja vu from last year. Cocoa prices were up 13% in the first half of 2014. That — along with rising milk and nut prices — prompted Hershey, Lindt and other chocolate makers to raise their prices about 8% on average last July.
To be clear, no major chocolate brands have announced additional price hikes this year. And you might think, “8% price hike, so what?”
But this price-hike problem could be a continuing trend. Part of the issue: location. The majority of the world’s cocoa supply is in two tiny countries: Ghana and the Ivory Coast in western Africa. Cocoa production in Ghana alone is down 22% from last year. If something happens there — such as another Ebola outbreak or bad weather — it sends ripples across the chocolate industry.
Once chocolate prices go up, it’s unclear if they will ever come back down. With a limited supply of cocoa and rising global demand for chocolate, particularly in China, chocolate makers have some ability to keep prices higher.
Consider this: 10 years ago, a ton of cocoa beans cost $1,571. Right now it costs double that, $3,244, according to the International Cocoa Organization. The ICCO projects that cocoa production will be down 4% this year compared to last.
So an 8% chocolate price increase probably didn’t hit your wall hard last year, but further price hikes could add up. Prices may not go up as much this year since milk is actually a little cheaper than a year ago. But cocoa — the stuff that makes chocolate taste great — continues to become more expensive.